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$A higher on Euro Central Bank rate cuts

Kim Christian

The Australian dollar is trading higher thanks to the European Central Bank's (ECB) stimulus measures.

Commonwealth Bank currency strategist Joseph Capurso said the local currency had maintained its strength on Friday afternoon ahead of the release of important US jobs numbers.

"It's pretty typical ahead of non-farm payrolls," Mr Capurso said.

"We've hung on to most of the gains in the aftermath of the ECB announcement."

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At 1700 AEST on Friday, the local currency was trading at 93.37 US cents, up from 92.82 cents on Thursday.

Traders are now waiting on the release of US non-farm payrolls data on Friday night.

A weak non-farm payrolls number could push the local currency close to 94 US cents.

Overnight the ECB said it would lower all three of its key interest rates, which have been on hold at record lows all this year, as part of a set of measures to prevent deflation.

The deposit rate, the rate at which the central bank pays commercial banks for depositing their unused cash, was reduced from zero per cent to minus 0.10 per cent, meaning banks will have to pay the ECB to hold their cash.

The local unit was buying 68.40 euro cents, up from 68.23 euro cents and 109.87 New Zealand cents, down from 109.92 NZ cents.

Meanwhile, Australian bond futures prices are unchanged ahead of the key US jobs numbers.

Prices moved little despite the European Central Bank lowering one of its key interest rates into negative territory for the first time.

RBC Capital Markets fixed income strategist Michael Turner said bonds had traded in a tight range despite the developments in Europe.

"All of the stuff is again happening overnight at the moment so we're left to chew on the leftovers during our time zone," he said.

"Last night we dipped on the ECB and we came all the way back and we've got payrolls tonight and that's keeping a lid on things ahead of the long weekend."

At 1630 AEST on Friday, the June 2014 10-year bond futures contract was trading at 96.230 (implying a yield of 3.770 per cent), unchanged from Thursday.

The June 2014 three-year bond futures contract was unchanged at 97.170 (2.830 per cent).